Problem
Morning Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0-1,500 units, and monthly production costs for the production of 1,000 units follow. Morning Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses.
Production Costs Total Cost
Direct materials $ 1,700
Direct labor 6,700
Utilities ($110 fixed) 550
Supervisor's salary 2,900
Maintenance ($340 fixed) 530
Depreciation 800
Suppose it sells each birdbath for $26.
Required:
1. Calculate the unit contribution margin and contribution margin ratio for each birdbath sold.
2. Complete the contribution margin income statement assuming that Morning Dove produces and sells 1,200 units.